Question 1

Figure 6-7  
-Refer to Figure 6-7. Which of the following price controls would cause a surplus of 20 units of the good?

Accepted Answer

A)  a price ceiling set at $6 
B)  a price ceiling set at $5 
C)  a price floor set at $9 
D)  a price floor set at $8 
A)  a price ceiling set at $6 
B)  a price ceiling set at $5 
C)  a price floor set at $9 
D)  a price floor set at $8

Question 2

Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would

Accepted Answer

A)  shift the supply curve upward by less than 50 cents. 
B)  raise the equilibrium price by 50 cents. 
C)  create a 50-cent tax burden each for buyers and sellers. 
D)  discourage market activity. 
A)  shift the supply curve upward by less than 50 cents. 
B)  raise the equilibrium price by 50 cents. 
C)  create a 50-cent tax burden each for buyers and sellers. 
D)  discourage market activity.

Question 3

Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

Accepted Answer

A)  An increase in the price of flour, which is used to make bread. 
B)  A decrease in the price of lunch meat. 
C)  A decease in the price of unsliced bread, which people consider as a substitute for sliced bread. 
D)  An decrease in the price of peanut butter and jelly. 
A)  An increase in the price of flour, which is used to make bread. 
B)  A decrease in the price of lunch meat. 
C)  A decease in the price of unsliced bread, which people consider as a substitute for sliced bread. 
D)  An decrease in the price of peanut butter and jelly.

Question 4

If the supply curve is more price elastic than the demand curve, will the buyers or the sellers bear a greater burden of a tax? Draw a diagram to illustrate your answer.

Accepted Answer

When the supply curve is more price elas

Question 5

A price ceiling set below the equilibrium price causes a shortage in the market.

Accepted Answer

A) True 
 B)False

Question 6

A price floor is

Accepted Answer

A)  a legal minimum on the price at which a good can be sold. 
B)  often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor. 
C)  a source of inefficiency in a market. 
D)  All of the above are correct. 
A)  a legal minimum on the price at which a good can be sold. 
B)  often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor. 
C)  a source of inefficiency in a market. 
D)  All of the above are correct.

Question 7

When OPEC raised the price of crude oil in the 1970s, it caused the

Accepted Answer

A)  supply of gasoline to decrease. 
B)  quantity of gasoline demanded to decrease. 
C)  equilibrium price of gasoline to increase. 
D)  All of the above are correct. 
A)  supply of gasoline to decrease. 
B)  quantity of gasoline demanded to decrease. 
C)  equilibrium price of gasoline to increase. 
D)  All of the above are correct.

Question 8

Rent control policies tend to cause

Accepted Answer

A)  relatively smaller shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run. 
B)  relatively larger shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run. 
C)  relatively larger shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run. 
D)  relatively smaller shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run. 
A)  relatively smaller shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run. 
B)  relatively larger shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run. 
C)  relatively larger shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run. 
D)  relatively smaller shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run.

Question 9

Table 6-6
  
-Refer to Table 6-6. If the government set a price ceiling at $4, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

A price ceiling set at $4 woul

Question 10

Figure 6-13
This figure shows the market demand and market supply curves for good X.  
-Refer to Figure 6-13. Which of the following price ceilings would be binding in this market?

Accepted Answer

A)  $4 
B)  $5 
C)  $6 
D)  $7 
A)  $4 
B)  $5 
C)  $6 
D)  $7

Question 11

Figure 6-21  
-Refer to Figure 6-21. Suppose buyers, rather than sellers, were required to pay this tax in the same amount per unit as shown in the graph). Relative to the tax on sellers, the tax on buyers would result in

Accepted Answer

A)  buyers bearing a larger share of the tax burden. 
B)  sellers bearing a smaller share of the tax burden. 
C)  the same amount of tax revenue for the government. 
D)  Both a) and b) are correct. 
A)  buyers bearing a larger share of the tax burden. 
B)  sellers bearing a smaller share of the tax burden. 
C)  the same amount of tax revenue for the government. 
D)  Both a) and b) are correct.

Question 12

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will decrease the effective price received by sellers of picture frames by

Accepted Answer

A)  less than $0.50. 
B)  $0.50. 
C)  between $0.50 and $1. 
D)  $1. 
A)  less than $0.50. 
B)  $0.50. 
C)  between $0.50 and $1. 
D)  $1.

Question 13

Figure 6-22  
-Refer to Figure 6-22. Sellers pay how much of the tax per unit?

Accepted Answer

A)  $0.50. 
B)  $1.50. 
C)  $3.00. 
D)  $5.00. 
A)  $0.50. 
B)  $1.50. 
C)  $3.00. 
D)  $5.00.

Question 14

Figure 6-26  
-Refer to Figure 6-26. How much tax revenue does this tax produce for the government?

Accepted Answer

A)  $480 
B)  $640 
C)  $360 
D)  $120 
A)  $480 
B)  $640 
C)  $360 
D)  $120

Question 15

Table 6-2
  
-Refer to Table 6-2. A price ceiling set at $20 will

Accepted Answer

A)  be binding and will result in a shortage of 75 units. 
B)  be binding and will result in a shortage of 200 units. 
C)  be binding and will result in a shortage of 125 units. 
D)  not be binding. 
A)  be binding and will result in a shortage of 75 units. 
B)  be binding and will result in a shortage of 200 units. 
C)  be binding and will result in a shortage of 125 units. 
D)  not be binding.

Question 16

Table 6-3
The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $2 above the equilibrium price in this market.
  
-Refer to Table 6-3. Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is

Accepted Answer

A)  $2. 
B)  $3. 
C)  $4. 
D)  $5. 
A)  $2. 
B)  $3. 
C)  $4. 
D)  $5.

Question 17

A binding minimum wage creates a shortage of labor.

Accepted Answer

A) True 
 B)False

Question 18

Rent control

Accepted Answer

A)  is an example of a price ceiling. 
B)  leads to a larger shortage of apartments in the long run than in the short run. 
C)  leads to lower rents and, in the long run, to lower-quality housing. 
D)  All of the above are correct. 
A)  is an example of a price ceiling. 
B)  leads to a larger shortage of apartments in the long run than in the short run. 
C)  leads to lower rents and, in the long run, to lower-quality housing. 
D)  All of the above are correct.

Question 19

Figure 6-5  
-Refer to Figure 6-5. If the horizontal line on the graph represents a price ceiling, then the price ceiling is

Accepted Answer

A)  binding and creates a surplus of 60 units of the good. 
B)  binding and creates a surplus of 20 units of the good. 
C)  not binding but creates a surplus of 40 units of the good. 
D)  not binding, and there will be no surplus or shortage of the good. 
A)  binding and creates a surplus of 60 units of the good. 
B)  binding and creates a surplus of 20 units of the good. 
C)  not binding but creates a surplus of 40 units of the good. 
D)  not binding, and there will be no surplus or shortage of the good.

Question 20

Figure 6-31  
-Refer to Figure 6-31. If the government set a price ceiling at $15, would there be a shortage or surplus, and how large would be the shortage/surplus?

Accepted Answer

A price ceiling set at $15 wou

Exam 6: Supply, Demand, and Government Policies

Figure 6-7 -Refer to Figure 6-7. Which of the following price controls would cause a surplus of 20 units of the good?

Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would

Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

If the supply curve is more price elastic than the demand curve, will the buyers or the sellers bear a greater burden of a tax? Draw a diagram to illustrate your answer.

A price ceiling set below the equilibrium price causes a shortage in the market.

A price floor is

When OPEC raised the price of crude oil in the 1970s, it caused the

Rent control policies tend to cause

Table 6-6 -Refer to Table 6-6. If the government set a price ceiling at $4, would there be a shortage or surplus, and how large would be the shortage/surplus?

Figure 6-13 This figure shows the market demand and market supply curves for good X. -Refer to Figure 6-13. Which of the following price ceilings would be binding in this market?

Figure 6-21 -Refer to Figure 6-21. Suppose buyers, rather than sellers, were required to pay this tax in the same amount per unit as shown in the graph). Relative to the tax on sellers, the tax on buyers would result in

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will decrease the effective price received by sellers of picture frames by

Figure 6-22 -Refer to Figure 6-22. Sellers pay how much of the tax per unit?

Figure 6-26 -Refer to Figure 6-26. How much tax revenue does this tax produce for the government?

Table 6-2 -Refer to Table 6-2. A price ceiling set at $20 will

A binding minimum wage creates a shortage of labor.

Rent control

Figure 6-5 -Refer to Figure 6-5. If the horizontal line on the graph represents a price ceiling, then the price ceiling is

Figure 6-31 -Refer to Figure 6-31. If the government set a price ceiling at $15, would there be a shortage or surplus, and how large would be the shortage/surplus?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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